Is Treasury the best forecaster in the world?

Stephen Koukoulas or “Kouk” as he’s known has this afternoon tweeted the following:

While some might guffaw at this given today’s $12 billion black hole debacle, Treasury (Tsy) is not one of them, recently conducting its own analysis of its performance and concluding the following:

The Review also finds that Treasury’s macroeconomic forecasts have been reasonably accurate. Over the past two decades, Budget forecasts of nominal economic growth have exhibited a mean absolute percentage error (MAPE) of 1.6 percentage points. Treasury’s macroeconomic forecasting performance is comparable with that of other domestic forecasters. In fact, the overriding impression of the forecast errors of Treasury, the Reserve Bank and Deloitte-Access Economics (Access) is the similarity in the error patterns across agencies (with errors for each agency exhibiting significant variation across time).

On the other hand, Treasury’s forecasts are comparable with, or better than, those of official agencies overseas, although some caution is required in making cross country comparisons over a period as short as ten years, and given that official agencies prepare forecasts at different times in the year:

The strange thing about this assessment is that the chart clearly illustrates inferior performance to all but New Zealand in forecasting nominal GDP. I would have thought remaining inside a 2% plus or minus deviation from forecast is a more than reasonable key performance indicator. As you can see, Australia’s Treasury is outside of it almost half the time versus much less for Canada, the US and UK.

One might be tempted to conclude that Treasury’s real skill is spinning a good yarn from poor fundamentals.